The definition of a whale-sized deal is relative to the industry you’re in. In software sales, it’s loosely defined as $750K-$1M< in ARR (Annual Recurring Revenue) depending on the stage of the company. In hardware, generally, it’s deals >$10M depending on the margin requirements, and in payments, it tends to be around >$100M in TPV (Total Payment Volume) as the margins in that industry are super thin. Regardless, each startup has its own definition of “land and expand” to whale size deals. For the purposes of this conversation, let’s stick with the software industry definitions. Anything <$100K = Land, $100K-$750K = Expand and >$750K = Whale.
Let’s first address why this is good for the buyer. It mostly comes down to risk. Corporations tend to be risk-averse and as a result, employees tend to take the path of least risk to ensure job security. Even if you have a super-strong Champion, they are still subject to bringing in new software which doesn’t deliver and being on the hook for that decision. So it’s much less risky to start small. Additionally, the channel by which the new software got into the company was likely bottoms-up and silo'd to one business unit or team within the larger organization. Hence, the sphere of influence to get a new deal done is often limited to just that team. If this was a C-level initiative the channel would have been through a VC, Board member, or perhaps the golf course :-) But seriously, the most innovative tech nowadays is typically far from the C-Suite purview. Furthermore, budget is often not pre-allocated for new tech and hence, you’re Champion has to go find it. Circling back on the risk factor, it turns out there is great reward if the new tech in fact delivers and exceeds all expectations — this is very good for the buyer. It could lead to an increase in status, recognition as the expert in the space, and even a promotion! I’ve been very proud to see many of the Champions I’ve worked with getting promotions as a result of bringing in the right solution and even speak at conferences in public forums; brings a smile to my face every time. However, all of these benefits evaporate if the seller tries to bite off more than they can chew during the early stages of the relationship.
Now let’s talk about why this is good for the seller and the startup as a whole. New logo acquisitions equal velocity; velocity is a metric measured by both sales leaders and venture capitalists and is often the leading indicator for future success. It’s also a leading indicator of your success as a seller. As a good friend of mine likes to say, “shavings make a pile.” It’s true and as you work toward your quota goal for the year; every step gets you closer to the finish line. Education is another reason why every deal counts. You should be learning something new every single time you close a deal no matter what the size. If you’re not growing, you’re dying and each deal gets you closer to growth so when the whale size deal comes along you can apply the lessons learned to ensure this one gets over the line. While these are all helpful reasons to close land deals, the ultimate goal is expansion to the whale size deal.
Expansion is the key to out-performance and I would argue the biggest driver to landing whale accounts. Once you’re in, you’re a trusted partner and just as important an approved vendor (make sure when you do your land deal all the proper paperwork is in place so you’re positioned to expand well). As you continue to support your customer, you learn more about the organization and how to align with them strategically. You expand your network and develop relationships with other potential Champions within different business units. In turn, you start to close deals with those other business units thus expanding your footprint and increasing ARR. Over time, you and your company gain a positive reputation which leads to an organic and natural progression to the C-suite. Once you hit the executive level; that’s when you get the opportunity to pull all the teams together to centralize all your efforts and get a truly holistic and corporate-wide agreement in place which turns your initial land deal into a whale deal. So what’s the plan to expand? Executing on all of the above. Yes, you’ll need to build yourself an account plan including an org chart, top priorities of your customer as stated in their public filings, etc. but all that is useless if you don’t execute. It’s very easy to be “one and done” and then move on to the next deal — don’t do it!
In summary, here are some reasons why the land and expand motion works well:
Good for the buyer:
- Reduces risk
- Reduces budget requirements
- Positions Champion as the hero
- Provides incentive for your Champion to be personally invested
Good for the seller:
- New logo acquisition and approved vendor
- Increased deal velocity
- Indicator of traction toward quota achievement
- Expansion opportunity which drives line-of-sight to quota target
- Credibility and reputation; internally and externally
- Leads to executive-level buyers and ultimately a whale-sized deal
As you can see, generally there is more upside to the seller than the buyer but the weighted average skews to the buyer in this case as they have the cash to exchange for your tech. Word of caution, this often takes years to fully come together so be patient, stay the course, work towards this goal daily and at the right inflection point all your hard work will pay off.